The Reserve Bank of India (RBI) has issued final directions on risk weights for retail, corporate and sovereign exposures, linking capital requirements more closely to borrower risk profiles. The norms will be effective from April 1, 2027. RBI noted that both fund-based and non-fund-based exposures can qualify as part of the regulatory retail portfolio and attract a 75% risk weight. Loans must be extended to individuals or small businesses with turnover up to Rs 500 crore, fall under standard retail products, remain within a Rs 10 crore exposure cap per borrower, and form part of a diversified portfolio where no single borrower accounts for more than 0.2%.
The central bank has also tightened exclusions, keeping most personal loans, non-transactor credit card dues, capital market exposures, derivatives and real estate-linked loans outside the regulatory retail category. Unsecured personal loans and revolving credit card balances will continue to carry a 125% risk weight, while other retail exposures that do not meet the qualifying criteria will generally attract a 100% risk weight. The RBI has also retained the flexibility to increase the 75% risk weight for specific banks if asset quality deteriorates. For housing loans, the norms introduce a loan-to-value LTV-linked framework, with lower risk weights of 20-40% for individual borrowers.